Transaction malleability in Bitcoin refers to the ability of an attacker to modify the transaction ID (TXID) of a Bitcoin transaction. It happens without changing its validity or impacting its confirmation on the network. The TXID is a unique identifier assigned to each Bitcoin transaction, which is calculated by taking a hash of the transaction data.
In the early days of Bitcoin, there was a flaw in the implementation of the protocol that allowed attackers to change certain fields in the transaction data and create a new TXID, while still preserving the validity of the transaction. This vulnerability opened the door to various attacks on the Bitcoin network, such as double-spending and denial-of-service attacks, as well as causing problems for other applications built on top of the Bitcoin protocol.
For example, some Bitcoin exchanges and wallet providers used the TXID as a way to track the status of transactions, and the malleability issue made it difficult for them to maintain accurate records. To address this issue, several proposals were made to modify the Bitcoin protocol, including the BIP62 proposal, which introduced a new strict encoding standard for transactions to prevent malleability.
In addition, Bitcoin Core released a software update that implemented the BIP62 proposal and other fixes to prevent transaction malleability. While transaction malleability is no longer a major issue in Bitcoin, it is still relevant in the context of other cryptocurrencies and blockchain applications.
It is important for developers to be aware of this vulnerability and take appropriate measures to prevent it in their own projects.